 Trade cost reduction, subcontracting and unionised wageDibyendu Maiti () and Arijit Mukherjee Labour Economics, 2013, vol. 21, issue C, 103-110 Abstract: We show the effects of trade cost reduction in the presence of a domestic firm's strategic output allocation between formal in-house production and subcontracting to the informal sector. Considering a one-way trade, we show that trade cost reduction increases the in-house unionised wage, in-house employment, union utility, the formal–informal wage gap and consumer surplus, it reduces informal production and the profit of the domestic firm, and it creates an ambiguous effect on welfare. Whether trade cost reduction increases the income gap between the domestic producer and the labour union is ambiguous, and depends on the trade cost and the cost of subcontracting. Considering a two-way trade with symmetric segmented markets, we show that a symmetric trade cost reduction reduces the domestic unionised wage, domestic in-house employment, union utility, it increases informal production, consumer surplus and it creates ambiguous effects of the profits. Keywords: Trade cost; Subcontracting; Unionised wage (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:21:y:2013:i:c:p:103-110 DOI: 10.1016/j.labeco.2013.01.001 Access Statistics for this article Labour Economics is currently edited by A. Ichino More articles in Labour Economics from Elsevier |
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